Overdependent on OTAs? Why you need to rethink your distribution mix

“It’s healthy that hotels have a distribution mix.”

Those are the words of Booking.com’s Gillian Tans, speaking at ITB last week. You might not hear us say this too often, but we wholeheartedly agree with her. It’s right that hotels have diverse streams of revenue so that they can reach as many customers as possible and stay flexible in a fast-moving sector.

Of course, we know that OTAs have their place and that for many hotels they are valued partners. But given this worrying trend, we wanted to revisit exactly why, when it comes to distribution, we’d advise against putting all your eggs in one basket.

The prevalence of OTA undercutting

An OTA and hotel partnership should be a win-win. Hotels get the opportunity to market their rooms to a wider audience and the OTA gets a reward for its role as shop window. But it doesn’t always turn out to be mutually beneficial. Hotels are undercut by online travel agents 27% of the time, meaning OTAs often drive business away from the hotels and to their own sites and cheaper prices.

The Agoda problem

Speaking with our clients in APAC, we know that despite the above hoteliers manage to maintain relatively good relationships with OTAs.

However, many hoteliers report seeing their room rates vary frequently on market leader Agoda. It’s suspected that the Booking Holding-owned OTA changes prices depending on location, so a customer in Kuala Lumpur might see something different to another in London. Others think price moves based on internet browsing activity, so search histories affect rates. This makes it exceptionally difficult for hotels to maintain parity with Agoda and runs the risk of losing out on that higher conversion rate.

Crucially this highlights an issue more generally with OTAs and their power over the market. Hoteliers we’ve spoken to have been unable to get greater transparency over pricing from Agoda. It’s unclear why, but you can imagine that being in such a dominant position, Agoda feels little impetus to explain.

One way to level out the playing field, is to drive more direct bookings. With a strong alternative channel, hotels should be in a firmer negotiating position even with market leading OTAs.

Reputational damage

We’ve explored what happens to conversions when you’re being undercut, but what about the less obvious impact; the erosion of consumer trust in your hotel.

Your guests shop around — Expedia research from 2015 said the average person visits 38 sites before booking — and seeing your rooms cheaper elsewhere is likely to undermine their confidence in your property and what they see on its website. That is not the typical starting point for a long-term relationship built on loyalty.

What’s more, if it puts people off booking on your website, you have to consider what it’s doing to your investments in ecommerce. Websites are expensive and they need to be firing on all cylinders to deliver return on that investment.

A poorer customer relationship

One of the reasons we believe that direct bookings are better for hotels is that they provide you with more information about your guest. From the very beginning of your relationship, you can build a rich profile of the customer and tailor every aspect of your service appropriately. That’s what breeds loyalty — a lucrative line of business for any hotel.

With OTA bookings, you’re left with offer scant information and therefore have little chance to surprise and delight guests with personalized service and relevant promotions. That’s hardly your hotel performing at it’s very best.

Hotel Digital Lab 2018

If all this has got you thinking, why not join us at Fastbooking’s Hotel Digital Lab 2018. Triptease Chief Tease Charlie Osmond, an expert on all things direct, will be speaking at a number of the labs, including the Hong Kong and Taipei events later this month. Register to attend with Hotel Digital Lab here.

Otherwise take a look at the below posts for more on the magic of direct: